You probably know a bit about equity release. You could even be thinking it’s a great way to release the money in your property.
But if you’ve heard negative things about equity release, you might be unsure that it’s right for you.
So we’re going to take a closer look at the most common equity release myths out there – and answer all of them.
This way, you’ll be fully informed with the facts so you can make the right decision for you.
(And do remember, if you ever need to talk to us here at Bower about anything, please call us for free on 0800 411 8668.)
Myth No. 01
Equity release is so confusing
Let’s clear that one up straight away. Equity release is simply a way to release the money – or the ‘equity’ – that’s built up in your home. It’s as simple as that.
You can never lose your home and you can spend the money on absolutely anything you want, such as:
- Paying for home improvements
- Helping a member of your family financially
- Making your retirement more comfortable
It’s true, there are different types of equity release plans, but these are there to help different people with different needs. The most popular ones are called Lifetime Mortgages and Home Reversion plans.
Learn more about different Equity Release schemes on our website.
Myth No. 02
Equity release isn’t safe
As with any financial plan, such as a pension or a mortgage, people have concerns and questions. And that’s only natural, as all these plans deal with your money.
But every reputable equity release company, like Bower, will be members of the Equity Release Council. This is a UK-based, independent body that is committed to delivering consumer safeguards and guarantees.
The Standards Board at the Equity Release Council work to ensure that equity release products are safe and reliable. Here’s an example of the rules they implement for your safety:
- For lifetime mortgages the interest rate must be fixed (or, if variable, the rate must be capped for the life of the loan)
- You have the right to remain in your property for life or until you need to move into long-term care
- You have the right to move to another property
- Your equity release plan must have a ‘no negative equity guarantee’
- You must be provided with a fair, simple and complete presentation and explanation of your equity release plan
- The benefits and limitations of the plan must be clearly set out, together with your obligations under the terms of the contract
- You will be given information about:
- All the costs that you will have to bear in setting up the plan
- The tax implications
- What will happen if you wish to move to another property
- How changes in house values may affect your plan
Myth No. 03
If I take out an equity release plan, I won’t own my own home
Well, this depends on the type of equity release plan you take out.
For example, with a Lifetime Mortgage (the most common type of equity release) you will maintain full ownership of your own home. You cannot be asked or made to leave it and it’s completely yours to stay in for as long as you wish.
There are no monthly payments either, unless you choose to make them.
Another equity release option is a Home Reversion plan. In this case, you sell a percentage of your home (up to 100%) although you carry on living there, rent-free, for the rest of your life. Please note you will not own the percentage of your home you sell
As with all equity release plans, your property must be your main home.
Your expert Bower advisor will tell you more about both these plans so together you can find the right one for you.
Myth No. 04
I’ll lose my home if I move into negative equity
Negative equity is where you owe more than your house is actually worth.
At Bower, our plans are covered by the Equity Release Council’s ‘no-negative equity guarantee’.
We only ever recommend and deal with companies/lenders that are members of the Equity Release Council too. This provides the safety and the guarantees to our customers mentioned in the Councils Standards.
All this means you’ll never lose your home while you occupy the property (even if it does move into negative equity) because of the no negative equity guarantee. Another myth busted!
Myth No. 05
I won’t be able to leave my family an inheritance
Yes, you can, but equity release will reduce the size of it (there are Inheritance Guaranteed Protection Products, and your advisor can tell you more about them).
Let’s explain this a little more. When you receive your lump sum through equity release, this money will be repaid when the property is sold, you move into full-time care or pass away. Any money left over from that sale would then be passed on to your beneficiaries.
Of course, there are many different types of equity release and you don’t have to take a lump sum.
You may choose a plan with a ‘drawdown’ option. This lets you release your money when you need it and, therefore, it can help reduce the total repayment required.
There’s lots to think about here and you can’t really make a fully informed decision until you talk to an expert. Your Bower equity release advisor will give you clear, impartial advice so you can decide the best course of action.
When you do meet, you are warmly invited to bring friends or family along to ask as many questions about equity release as you want to.
Myth No. 06
Equity release is really a last resort
Years ago, equity release had a pretty poor reputation, but it’s a completely different situation today.
Now there are stringent rules and financial regulations in place – as well as organisations such as the Equity Release Council – to ensure every equity release plan meets certain consumer standards and every customer is protected.
As of 2022, over half a million UK homeowners had chosen equity release to give them a personal, secure, trusted way to enjoy more financial flexibility.
Equity release has become a first choice for thousands – not the last one.
Myth No. 07
I’lI leave my family in debt if my home loses its value
You really won’t. There is zero risk of leaving your family in debt due through choosing equity release.
All Bower’s products fully meet the Equity Release Council’s Product Standards and feature a ‘no negative equity guarantee’.
This means you will never owe more than the value of your house, even if your home falls in value.
Find out more
We hope this information has been useful and shown how safe and regulated equity release is.
If you’d like to know more, or have another equity release myth you want to discuss, then simply get in touch with the award-winning equity release team at Bower.
Our experienced advisors will be happy to answer all your questions and, if you want to take things further, arrange a visit.
Please remember:
Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. To understand the features and risks please ask for a personalised illustration.
Equity release requires paying off any outstanding mortgage. Equity released, plus accrued interest, to be repaid upon death or moving into long-term care. Equity release will affect the amount of inheritance you can leave and may affect your entitlement to means-tested benefits now or in the future.
We know there’s lots to consider here, so to find out more about any of the products and the services we’ve mentioned, call us on the freephone number 0800 411 8668, request a call back, email us, or join the live chat you’ll find on our website.
Finally, if you are considering equity release, we strongly recommend you read our ‘Pros and Cons of Equity Release’ page carefully. Then if you think you do want to proceed, call one of our specialists for a no-obligation conversation.
We are always here to help you.
